The Nigerian Communications Commission (NCC) and the Federal Inland Revenue Service (FIRS) do not believe that telecom companies in Nigeria are remitting the correct amount of VAT (value added tax). It is a financial optical illusion: the mobile density is increasing, mobile penetration is going higher but VAT has remained largely flat. Government has relied on the telecom operators to self-report these tax elements. Interestingly, the government does not believe those numbers but at the same time cannot challenge them in the courts. So, what is the way out? Install a good “malware” in the servers of the telecoms to help you track, calculate and report accruable VATs for the government in real time.
Yes, Nigeria is trying to get over its 20th century problem: ability to organize its systems to have the ability to collect taxes in full and accurately, at least in this sector. An MOU has been signed between NCC and FIRS to “ensure the tax agency ascertain accuracy and completeness of value added tax (VAT) elements and other taxes payable in the transactions of telecoms operators. With the MoU, the FIRS will be able to integrate an application programming interface (API) technology solution with the systems of telecom Operators for independent verification of the amount of VAT that should be paid by mobile network operators (MNO) rather than relying entirely on the Operators’ books of accounts.”
Now, can you copy me? Affirmative, tune to Channel “more money in vault”. Because with this legal “malware”, the government could essentially generate the balance sheets and profit & loss statements for the telcos before their accountants begin work! But thou shall not judge because in Nigeria everyone is a victim. You pay VAT, yet you must run a local government of your own, providing your power, security, water, etc. Yet, the government needs resources to have any chance of helping you. The game continues in Naija.
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In line with its inter-agency collaboration, the Nigerian Communications Commission (NCC) has signed a Memorandum of Understanding (MoU) with the Federal Inland Revenue Service (FIRS) to ensure the tax agency ascertain accuracy and completeness of value added tax (VAT) elements and other taxes payable in the transactions of telecoms operators.
With the MoU, the FIRS will be able to integrate an application programming interface (API) technology solution with the systems of telecom Operators for independent verification of the amount of VAT that should be paid by mobile network operators (MNO) rather than relying entirely on the Operators’ books of accounts. Speaking during the MoU signing ceremony in Abuja on Tuesday, the Executive Vice Chairman of NCC, Prof. Umar Danbatta, said that diligence and appropriate due processes were undertaken to conclude the MoU, as the Commission took its time to understand the import of the MoU.
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The NCC honcho said due diligence took place, before signing of the MOU. In other words, the telecom operators were in agreement, else we should be expecting legal battles soon.
Again, if it’s legally permissible for tax agency to monitor/track company’s earning in realtime, there may not be need for them to have auditors in their payroll; just get few programmers and install same in all the companies in Nigeria! Sounds like a police state to me here.
I am still wondering whether NCC’s regulatory oversights extend to financial reporting. I am not a lawyer, but I do not see how possible anyone could craft such law and got it passed.
If it’s now legal and moral to police companies in this way, then we may not have any need for FIRS, we can as well legislate on tax, get APIs installed everywhere and send in the police to arrest defaulters; FIRS doesn’t have any role again, we can count 1 2 3 on our own.
We see how it goes, and which sector will be targeted next…
If this isn’t a lazy man thinking, I don’t know what is. The people we hired to do a job keep showing us that they are incompetent and clueless; yet we still don’t get the memo.
While there are potent and interesting privacy based arguments against an API, the law (sections 29 and 30 of the FIRS Act amongst others) presently empowers the FIRS to go into a company’s premises and take/make copies of any books or records stored electronically.
Clearly this law was not made with live data collection in mind. However, subject to cyber security concerns with an API, I see a possibility that a court may adopt a purposive interpretation and take the view that there’s no fundamental difference between collection of information after the fact and collection of information live.